Everyone is aware of the importance associated with operating under a budget and many even understand its purpose. However, despite knowledge of the typical aspects of accounting, a majority of Americans do not associate a budgeted practice with their monthly or annual expenditures. By not keeping up with their finances, unfortunately, many end up spending more than they can afford to cause them to live in debt. 

People go into debt for a variety of different reasons but the most common cause is associated with terrible spending practices. The development of these habits can quickly compound, especially with the use of credit cards, and before people know it they are well over their heads with spending, debt, and owing back far more than they ever initially borrowed for any of their purchases. To avoid this cycle, creating a budget for monthly spending can help individuals either stay on track or get out of debt completely. The following main budget categories are essential for its creation.

Purpose

Understanding the purpose of your financial goals and the reasoning behind creating a budget can ensure that you stay on track once it’s completed. These financial goals can be arranged for many different reasons. From saving up to make a fun purchase, take a trip, or make payments to get yourself out of debt, the purpose of your budget is critical to its success.

Income

The baseline for setting up your budget will be income, either individual or household, depending on the scope of your plan. These set earnings will create the overall amount of money that will be contributed to the budget for all upcoming expenses. 

Set Expense

These types of expenses are guaranteed for every spending period. Rent, mortgage payments, insurance, and some other loans are all consistent every month. Known amounts which are required to be paid to manage the cost of living for you and/or your family.

Variable Expense

Variable expenses can change each period but are still required. These can include such items as utility bills, groceries, gas, and any other purchases that are necessary for living and working but fluctuate in price.

Optional Expense

The final category of budget components includes optional expenses. It is here where individuals can most often make changes to save some funds for other purposes. These expenses typically fall under the categories of restaurant meals, entertainment (concert tickets, movies, cable or satellite television), and any other spending types that aren't relegated to survival.

Once you’re ready to discuss budget components, create an expense plan for monitoring your finances, or have any tax-related questions then let the professionals at Bloch Rothman and Associates assist you today. In addition to providing answers for all of your questions, they can also take care of multiple other issues dealing with paying or owing back taxes, required audits signaled by either the IRS or an outside agency, or any other personal or corporate wealth management issues. Along with providing a top-quality tax service, our group can also complete all types of returns and get answers to any other factors associated with financial issues or concerns you may have. Serving Denver and all of the surrounding areas for 35 years, our firm has an extensive history of helping clients with any of their tax issues or dealings with the Internal Revenue Service. If you have questions about your personal, business, estate, or any other filings, don’t hesitate to contact us today. Available for all of your tax needs, there are also bookkeeping and payroll services offered to assist you and your business. We look forward to meeting you and providing the type of service you can rely on whatever your needs may be very soon!